Our area is very fortunate to be home to a wide variety of small and large biotechnology fi rms. From a general business perspective, they can be some of the most exciting customers to work with because of the technology they are developing and the potential to improve lives. That said, from an insurance perspective, they’re also very interesting in terms of the unique risks that they face. While each business is different, taking the following 10 steps, broken down according to the age and maturity of your business, will provide your business with a solid foundation upon which to grow and keep out from losing your cool when business takes an unexpected detour.
1. SPOILAGE COVERAGE
A lot of industries have inventory that can spoil due to change in temperature or conditions, but unlike a typical restaurant where a spoilage event could spell inconvenience, for biotech firms these events can have catastrophic consequences. For example, a firm that relies on perishable cell cultures that represent months and months of research has a spoilage event when, over a holiday weekend the refrigerator unit has a mechanical breakdown. In some cases, these samples cannot be replaced, which could set the firm back months, if not years, in their development.
2. INTERNATIONAL HUMAN CLINICAL TRIALS
It is not uncommon for a biotech firm to be running clinical trials in multiple countries around the world. Making sure that the firm carries proper liability coverage in those countries can be tricky, as some nations do not accept coverage from firms that are not domiciled in those countries. Required minimum limits also vary from country to country. Further, some policies do not address emergency medical expenses by those trial participants. Firms with these types of exposures need to pay close attention to both the regulatory requirements they face as well as how their insurance program would react.
3. DEPENDENT PROPERTIES/ENTITIES
We often see where biotech firms are dependent on a particular supplier in order to manufacture their end product. Without paying attention to this particular dependency, there can be a large uncovered exposure should something happen to that supplier’s ability to produce. The “off -the-shelf” property policy would not respond to this type of claim because there’s no impact to the biotech firm’s facility, even though that loss to the supplier’s facility could be every bit as destructive as a fire in the biotech firm’s main lab.
4. ACQUISITION EXPOSURE
Small biotech firms are often targeted for acquisition from larger firms. Like any acquisition, the acquiring firm must pay close attention to the assets and liabilities that they are taking on. Conversely, the selling fi rm’s principals must be made aware of any potential retention in liability. These include prior acts and product liability from the company being acquired. It is important to recognize the coverage afforded and excluded by the acquiring firm’s insurance as well as the prior insurance carrier(s).
5. RESEARCH & DEVELOPMENT FUNDING
Unlike a typical business, biotech firms that are in the R&D phase don’t normally turn a profit. The time it takes these firms to get an actual product to market can be extensive and involve various types of funding mechanisms that may or may not continue after a property loss. That said, Business Income coverage is available to these types of firms, which allows them to recover revenue that is expected during this phase of a firm’s development.
6. CONTRACT LANGUAGE
Biotech firms enter into a wide variety of contracts with suppliers, vendors, linical trial sites, trial participants and funding agencies which can mandate a vast assortment of coverage concerns. It is imperative that, as a part of the risk management process, those contracts are carefully reviewed from an insurance standpoint with an insurance provider that is familiar with these types of firms.
7. WE’RE VERY LUCKY TO HAVE SOME AMAZING BIOTECH COMPANIES IN OUR AREA AND ARE GRATEFUL FOR THE OPPORTUNITY TO WORK WITH MANY OF THEM.
For those involved in managing risk for these types of companies, we strongly recommend that you partner with an insurance carrier and agent who are familiar with the unique risks that you face. Insurance carriers are not created equal, nor are underwriters, and without a relationship with an experienced insurance partner, your firm Could find that your coverage leaves something to be desired at the time of loss.